HPP Holdings Berhad (KLSE:HPPHB) Is Paying Out Less In Dividends Than Last Year

HPP Holdings Berhad (KLSE:HPPHB) is reducing its dividend to MYR0.0075 on the 30th of Novemberwhich is 25% less than last year's comparable payment of MYR0.01. This means the annual payment is 3.8% of the current stock price, which is above the average for the industry.

View our latest analysis for HPP Holdings Berhad

HPP Holdings Berhad's Dividend Is Well Covered By Earnings

If the payments aren't sustainable, a high yield for a few years won't matter that much. The last payment was quite easily covered by earnings, but it made up 127% of cash flows. While the company may be more focused on returning cash to shareholders than growing the business at this time, we think that a cash payout ratio this high might expose the dividend to being cut if the business ran into some challenges.

If the company can't turn things around, EPS could fall by 10.9% over the next year. If recent patterns in the dividend continue, we could see the payout ratio reaching 78% in the next 12 months which is on the higher end of the range we would say is sustainable.

HPP Holdings Berhad Doesn't Have A Long Payment History

Without a track record of dividend payments, we can't make a judgement on how stable it has been. This doesn't mean that the company can't pay a good dividend, but just that we want to wait until it can prove itself.

The Dividend Has Limited Growth Potential

Given that the track record hasn't been stellar, we really want to see earnings per share growing over time. HPP Holdings Berhad's earnings per share has shrunk at 11% a year over the past five years. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in.

HPP Holdings Berhad's Dividend Doesn't Look Sustainable

Overall, the dividend looks like it may have been a bit high, which explains why it has now been cut. While HPP Holdings Berhad is earning enough to cover the payments, the cash flows are lacking. Overall, we don't think this company has the makings of a good income stock.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Case in point: We've spotted 4 warning signs for HPP Holdings Berhad (of which 1 is a bit concerning!) you should know about. Is HPP Holdings Berhad not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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